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Dominion puts S&P on hold

Dominion Finance has postponed its attempt to secure a rating from international research firm Standard & Poors (S&P) until market conditions in the sector improve, according to CEO, Paul Cropp.

Wednesday, May 14th 2008, 10:07PM

by David Chaplin

"In this current environment it is the worst time to get a rating," Cropp said.

He said Dominion engaged S&P late last year to begin the ratings process with the researcher asking for updated information post March 31 this year.

"We've heard nothing from them since then," Cropp said.

In an announcement reporting Dominion's full-year results yesterday the group repeated Cropp's AGM statement in August last year when he said: "While securing a rating is important, our view is that it is just one part of the picture for a stakeholder to consider and certainly not a saviour."

For the year to March 31 the NZDX-listed Dominion Finance Holdings (which includes the group's two main finance company subsidiaries, Dominion Finance Group and North South Finance) reported a $5 million drop in net profit after tax compared to the previous year.

Nonetheless, Cropp said the $8.9 million profit was a "robust" result which reflected its conservative provisioning for future bad debts.

The group has already written off $10.1 million in bad debts and made a collective provision of $7.1 million for future impaired loans - $5 million above its earlier estimates.

Cropp said with crumbling investor sentiment and a poor report card from the Reserve Bank in its latest 'Financial stability' publication, the finance company sector was facing difficult times.

He said that was reflected in the poor debenture reinvestment rate across the sector with Dominion's monthly reinvestment level slumping to below 20% for the first time in April.

For the year the group's reinvestment rate stood at 40%. However, Cropp said Dominion had strong lines of wholesale funding from ASB and the Royal Bank of Scotland, which collectively amounted to $90 million.

"We're always on the lookout for other lines of funding ... we're in discussion with a few groups," he said.

Despite the difficulties in the sector Dominion has declared a one for 20 non-taxable bonus issue of fully paid ordinary shares and a 1 cent fully-imputed cash dividend. Rick Bettle, Dominion chair, said the group remained upbeat about its future performance.

"Very simply, if we had greater investor confidence the business would almost certainly be having its most profitable period," Bettle said in a statement to the NZX.

"However, based on current information to hand, assets will decrease, operating costs will decrease, but we have taken a cautious view of underlying assets values, so an early indication is for NPAT to exceed what we have reported this year."

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